Time is still right for smaller companies

us equities

With large caps beginning to outperform again, this year is likely to be a much tougher one for small caps, but strong productivity and corporate earnings suggest there is still further room for outperformance in the sector

One needs to be careful not to confuse what might feel real with what actually is real. The year 2003 was marked by extreme events, both in the stock market and the wider world. In the initial stages of the year, the US equity market eerily reflected the mood of the country. Information about the prospect of war in Iraq was instantly mirrored in the movements in the market. In the weeks leading up to the invasion of Iraq, prices were wildly volatile, though mostly falling, giving most securities negative returns for the first quarter and testing the previous 9 October 2002 market bottom...